Americans’ Economic Outlook Fell in January to Three-Month Low

By Jeanna Smialek -
Jan 17, 2013

Americans’ economic outlook
deteriorated in January to a three-month low as paychecks began
reflecting higher taxes.

The gap between positive and negative expectations widened
to minus 7 this month from zero in December as the share saying
the U.S. economy is improving dropped to the lowest since
September, according to the Bloomberg Consumer Comfort Index.
The weekly measure declined to minus 35.5, the weakest since
Oct. 7, from minus 34.4 in the prior period.

Households may find it harder to boost spending after
payroll taxes to fund Social Security benefits reverted to 6.2
percent this year from 4.2 percent. While improving property
values and cheaper gasoline are providing some relief, Americans
are being subjected to constant political bickering over the
federal debt limit and the budget.

“The depressed attitudes are undoubtedly a function of a
diminished paycheck and uncertainties surrounding the U.S.
fiscal situation,” said Richard Yamarone, a senior economist at
Bloomberg LP in New York. “Consumers can’t spend what they
don’t have.”

Other reports todays showed housing starts surged more than
forecast in December and fewer Americans than projected applied
for jobless benefits last week.

Builders broke ground on 12.1 percent more houses last
month, taking starts to a 954,000 annual rate, exceeding all
forecasts in a Bloomberg survey of economists and the most since
June 2008, the Commerce Department reported. For all of last
year, construction began on 780,000 homes, up from 608,800 in
2011 and also the most since 2008.

Fewer Claims

Applications for jobless benefits decreased by 37,000 to
335,000 in the week ended Jan. 12, the fewest since January
2008, according to Labor Department figures. Economists forecast
369,000 claims, according to the median estimate in a Bloomberg
survey. A spokesman for the agency said the drop may reflect the
difficulty the government has in adjusting the data following
the holidays when seasonal workers are let go.

Stocks climbed on the better-than-estimated data. The
Standard & Poor’s 500 Index rose 0.3 percent to 1,476.76 at 9:40
a.m. in New York.

The decline in the Bloomberg comfort gauge last week was
led by a fourth-straight drop in the buying-climate index. The
measure retreated to minus 43.3, the weakest reading since
September, from minus 41.9.

Today’s report showed that 28 percent of those surveyed,
the fewest since September, said it was a good time to buy
things they want or need. One in 10 called in an “excellent”
time for purchases, the fewest in 11 months.

Income Group

Among income groups, people making $50,000 to $75,000 a
year turned more pessimistic than at any time since early June.

The personal finances barometer eased to minus 2.7 from
minus 2.6 the prior week. The measure assessing Americans’ views
on the current state of the economy dropped to minus 60.3 from
minus 58.7.

The increase in payrolls taxes means that someone earning
$50,000 a year will get about $83 less per month.

The Bloomberg monthly expectations survey showed 29 percent
of Americans said the economy is getting better, the smallest
share since September. In two months, the figure has dropped 8
percentage points, with registered Democrats, men, southerners
and older Americans among the groups accounting for the biggest
decreases in sentiment.

Further declines in sentiment may make it difficult to
build on a recent improvement in consumer spending. Commerce
Department figures earlier this week showed retail sales climbed
0.5 percent in December, the most in three months.

Auto Demand

Auto sales, which have been a bright spot in the economy,
are expected to grow in 2013 by 3 percent, Jim Lentz, U.S. sales
chief for Tokyo-based Toyota Motor Corp., said at an industry
conference in Detroit on Jan. 16.

“The U.S. economy is expected to continue to improve,”
Lentz said. “Consumers appear to be more upbeat about the
business and labor condition.”

Discounts from retailers like Target Corp., which has
pledged to match prices year-round of several e-commerce sites,
and lower fuel prices will help underpin spending.

A gallon of regular gasoline at the pump averaged $3.30
nationally in December, the lowest in a year and down 14 cents
from a month earlier, according to AAA, the biggest U.S.
motoring group.

The weekly comfort reading remained higher among Democrats
than Republicans for an unprecedented 43rd straight time, with
the difference widening to a record in data back to 1990.

Survey Methodology

The Bloomberg Consumer Comfort Index, compiled by Langer
Research Associates in New York, conducts telephone surveys with
a random sample of 1,000 consumers 18 and older. Each week, 250
respondents are asked for their views on the economy, personal
finances and buying climate. The percentage of negative
responses is subtracted from the share of positive views and
divided by three. The most recent reading is based on the
average of responses over the previous four weeks.

The comfort index can range from 100, indicating every
participant in the survey had a positive response to all three
components, to minus 100, signaling all views were negative. The
margin of error for the headline reading is 3 percentage points.